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Silver Prices Forecast: XAG/USD at Risk of Falling Further as Traders Await Fed Policy Decisions

By:
James Hyerczyk

Next week's consumer inflation data and Fed policy decisions pivotal for silver prices; traders will watch and adjust strategies.

Silver Prices Forecast

In this article:

Highlights

  • Upcoming week could see XAG/USD prices dropping below $23 due to a resilient dollar and rising Treasury yields.
  • Economic data releases and the Federal Reserve’s policy meeting will shape silver’s trajectory in the near term.
  • Traders brace for potential volatility and consider adjusting positions as they await next week’s developments.

Silver Dips Below $23 as Dollar and Yields Climb

This week, silver traders watched as prices dipped sharply below $23 an ounce, marking a significant turn in the market. This decline was primarily driven by a strengthening dollar and a rise in Treasury yields, following a jobs report that exceeded expectations and led traders to reassess the likelihood of U.S. interest rate cuts.

Weekly Silver (XAG/USD)

Supply and Demand Shifts in Focus

Spot silver, tracked as XAG/USD, fell 9.71% this week, marking its worst performance since June and a significant drop from the seven-month high of $25.91 reached on December 3. This price movement reflects a complex interplay of supply and demand factors, shaped by broader economic trends and shifts in investor sentiment.

Impact of U.S. Economic Data

The movement in silver prices this week was largely influenced by U.S. economic indicators, especially the November jobs report. The report showed a stronger labor market than anticipated, with nonfarm payrolls increasing by 199,000, exceeding forecasts. The unemployment rate also fell to 3.7%, pointing to a tighter labor market and impacting sentiment towards silver.

Global Events and Central Bank Policies

Decisions by major central banks, particularly the Federal Reserve, along with global geopolitical events, play a significant role in shaping the silver market. Recent comments by Fed Chair Jerome Powell have tempered expectations for immediate rate cuts, influencing investor strategies in the silver market.

Strategic Reactions to Economic and Policy Changes

The silver market’s movements are also a response to strategic financial shifts. The rise in the U.S. dollar index and Treasury yields, especially the significant increase in the 10-year note, indicates market adjustments following the labor market data. These developments have led traders and investors to reevaluate their positions in silver, in anticipation of future policy decisions by the Federal Reserve.

Looking Ahead: Silver’s Short-Term Forecast

In the coming week, volatility is expected to continue in the silver market. The Federal Reserve’s upcoming policy meeting and additional economic data such as the U.S. Consumer Price Index (CPI) will be crucial in determining silver’s trajectory. Traders are closely monitoring these developments to gauge their potential impact on interest rates and, consequently, on silver prices.

As the market prepares for the Federal Reserve’s meeting on December 12-13, traders are positioning themselves for various potential outcomes, compounded by significant market easing already priced in. This environment sets the stage for potentially significant fluctuations in silver prices, driven by changing investor sentiment and market reactions.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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